Health Minister David Cunliffe has given conditional approval to allow pig cells to be transplanted into eight people with Type 1 diabetes as part of a clinical trial.
The approval follows an application from a New Zealand-based firm, Living Cell Technologies, which has been in the pipeline for two years.
LCT wants to trial a form of xenotransplantation which involves injecting pig cells that produce insulin into people with Type 1 diabetes to reduce their need for regular insulin doses.
Radio New Zealand's health correspondent says there has been heavy vetting by government agencies to ensure there is minimal - if any - chance of retroviruses in the cells being transferred to people.
Mr Cunliffe says the trial will be held soon at Middlemore Hospital in Auckland, subject to a final review.
LCT chief operating officer Paul Tan says concerns about pig retroviruses have diminished and the company is confident of gaining full approval.
Mr Tan says there is no shortage of people with Type 1 diabetes who are keen to take part.
Researchers give qualified support
The Society for the Study of Diabetes has given its qualified support to the trial.
President Patrick Manning says it is good a decision has been made and the society is pleased with conditions set.
"We think that it is important that there is strong oversight of these types of studies and we note that there will be a board developed to oversee the study and to look at both its safety and hopefully also the effectiveness of the study."
However, Associate Professor Manning says the society has not seen the details that would demonstrate that international guidelines have been met.